At the end of last week we reported on the results of European SIs Atos and Capgemini– see Atos UK and Capgemini UK: Under the covers. Today is the turn of Steria. Total group revenues increased by 4.6% to Eur1,872.2m, representing organic revenue growth (at constant currency and taking into account the consolidation of NHS SBS) of 2.4%. This is significantly below Capgemini’s organic growth for the year of 7.5%, though above Capgemini which recorded 0.9% growth (remembering though that Capgemini was dragged down by HMRC Aspire). The good news is that the Steria’s growth was across all service lines. Though infrastructure management (up 7.1%) and BPO (up 9.9%) were the stars, consulting, SI and application management also grew, albeit by a more modest 1.5%. On this morning’s results call, Francois Enaud, Steria’s Chairman and CEO, highlighted the growth in SI & consulting as a sign that customers were increasingly turning to Steria to transform their businesses.
In the UK, like-for-like growth was just 1% to Eur735.2m (France was by far the best performer with 6.7% growth). Indeed, in Q4, UK turnover declined by 2.1%. It was the finance sector dragging the numbers down, posting a negative performance over the period (indeed this was the trend for the Group as a whole). Notably, utilities, telecoms/media, and transport grew 2.9% as did public sector at 5.5% due to growth in defence, police and health. However, public sector was also highlighted as the reason for a decline in the book to bill ratio from 0.9 to 0.81 at the year end. Enaud pointed to good prospects for the replication of its Cleveland 'front-line policing' solution and its NHS SBS shared services platform that failed to translate into contracts during 2012. He did though express optimism that contracts would be signed in 2013.
Steria’s operating margin declined from 7.8% to 6.4% (before amortisation) (for comparison, Atos stood at 6.6% for FY12 while Capgemini was at 8%). Steria blamed “a challenging pricing environment and an increase in the average intercontract level (bench) in a volatile market”. Interestingly neither Capgemini nor Atos, which both increased operating margins year on year, mentioned pricing pressure in their FY12 results. In Q312, Steria launched its “3 P” cost saving plan targeting cost savings of Eur18m to Eur20m (as a result restructuring charges increased by Eur30m including Eur14m related to the “3 P” plan). As a result, operating margins are expected to improve in FY13, on the back of “slight” organic growth.